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INVESTMENT: Baozun. It continues to over deliver with its reports
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BT 201909 investment 01Technology companies continue to rise in China, as they cater to more people and deliver more value. Those companies are displaying good performance and rising in the digital sphere. One such company is Baozun, which is a large e-commerce solutions provider. They are very similar to the US company ‘Shopify’ in that they provide digital marketing, warehousing, and customer services. Both companies had their IPOs at very close dates, as well. The company (Baozun) helps its customers to connect their online stores with their physical stores to give their buyers a seamless shopping experience and enhance operations. The customers of Baozun are high profile companies, such as Nike, Levi, Microsoft, and others. Currently, Baozun has a customer base of at least 172 big brands.

The company has had a market share of around 22% measured by transactions value in 2015, and this share is expected to be much larger today given the company’s consistent results. Baozun currently serves Chinese customers.


BT 201908 INVESTMENT 02Financial performance

Baozun’s stock has grown in price since 2016 from below 10 USD per share to over 40 USD. The stock is known to be volatile and may be challenging for short term traders, but it has consistently delivering when it comes to growth, often beating expectations. The company has a market capitalization of 2.461 billion USD as of August 7th, 2019. Its annual profit margin is 5 percent and it has healthy solvency with debt to assets ratio of 13.24%. A key positive factor about the company is that 2.4 percent of its shares are held by people inside the company. This helps keep those key stakeholders engaged and motivated to keep up a good performance and results.



BT 201909 investment 05Most equity research companies are bullish about the stock

The prospects of the company’s stock are promising. Many research companies were positive about its future direction. Jefferies equity researchers changed the status of Baozun Inc. (NASDAQ: BZUN) shares to a “Buy” rating in their report published on August 5th, 2019. Credit Suisse also published their reports on BZUN shares, where they marked BZUN under “Outperform” rating, on July 17th, 2019. Additionally, BZUN shares got another “Buy” rating from CLSA. BofA/Merrill Initiated the “Buy” rating for BZUN shares, as published in the report on June 16th, 2015. Morgan Stanley also expects the stock to go up based on their forecasts. Furthermore, there seems to be high interest in the stock from institutional investors, who have been more channelling more capital into Baozun. Those investors usually have a long-time horizon, which adds to the optimism about the growth of the stock.


该公司股票的前景充满希望。许多研究公司对其未来发展方向持积极态度。 Jefferies股权研究人员在2019年8月5日发布的报告中将宝尊公司股票的地位改为“买入”评级。摩根士丹利还预计该股票将根据其预测上涨。此外,机构投资者对股票的兴趣似乎很高,他们将更多资金引入宝尊。这些投资者通常有一个长期的视野,这增加了对股票增长的乐观情绪。

BT 201909 investment 03Enhanced business model

Although the company focuses on digital solutions and IT infrastructure, its business model is better than the traditional model of an online marketplace. Baozun provides services that help clients integrate their operations both online and elsewhere. Even Alibaba, the major Chinese global platform believes in the viability of Baozun’s model and has invested in it. Alibaba integrates Baozun’s services into Tmall (a B2C online retail website) and Taobao (an e-commerce website).

The model Baozun uses has matured with time. It started as a distribution model, where it acquires products from sellers and sells and delivers them to buyers. However, now, it allows sellers to sell directly to customers. This has increased the gross merchandise volume going through its platform and led to higher revenues.




BT 201909 investment 04The ecommerce market

In general, Baozun works in a flourishing sector. The ecommerce market has been growing throughout the years with more people shopping and spending money online. In 2018, there were 649.9 million shoppers, whereas in 2019 it is estimated that there are (or will be) around 722.4 million shoppers. In 2022, the number of online shoppers is expected to reach 931.8.

Although those numbers are impressive, Baozun does provide a much wider range of services, including IT infrastructure and digital marketing services. This adds up to its growing revenues. Shareholders can expect decent returns, and even if the company, on rare occasions, delivered downbeat earnings, it was because of excessive investment. The strategy that the company follows is highly long term oriented.




BT 201909 investment 02Conclusion

Baozun is a remarkable company in the services sector, and it has been receiving adequate attention from investors and the media alike. Although the stock is a good investment over a long-time horizon, it may not be suitable to investors with a faint heart. It is characterized by high volatility, and thus speculators may find both opportunity and risk in it. The high-profile portfolio of clients the company has will enable it to weather economic storms should they occur. The big brands that rely on Baozun will guarantee a constant stream of demand. Since the company is focused on serving the Chinese market, it is currently relatively isolated from the effects of the trade war (although it may still be affected through supply chain disruptions). In the overall, all the factors seem to be pointing in favour of buying the stock, but prudence is advised.


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